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Originally Posted by NevadaJim
I think I get the jist of this but would like to make sure.
For a driver, it boils down to "pay taxes now, or pay taxes later" as far as taxes are concerned?
Kind of.
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Over a tax year period it wouldn't affect what I really made, but just shows a lower amount for tax purposes? Per diem is then calculated when figuring deductions?
It all depends. Some companies will dock a few cents per mile if you get on the per diem program.
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For company, they make out an paying less tax on the per diem? They also don't pay as much into my SS account?
For the company, the amount they pay you as per diem is a 100% writeoff. They pay less SS and FICA on your income.
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I have read so many say it's a bad deal for the driver but, other than the Social Security issue, I don't understand where it hurts the driver. I'm talking specifically from an income standpoint, and not credit, getting loans and all the other stuff. From an annual income standpoint how does this hurt the driver?
If they pay you too much in per diem, you will be responsible for the taxes on the rest. That money would be considered "untaxed income". It could really bite you in the butt at the end of the year if they pay too much. The original poster stated that her husband's company was paying him $52 per day in per diem. He can only deduct $39 of that money on the standard meal deduction. That means that $13 per day would be untaxed income. Multiply that times 300 days on the road, and you are looking at almost $4000 in untaxed income - that amount could leave him with a tax bill of over $1000 if he has no other deductions to offset it.
It is my personal opinion that the risks far outweigh the benefits of taking the per diem option. It isn't like you are getting a bigger paycheck because of it - you are only getting the tax break
you would get anyway earlier. But, if it isn't done correctly (and in most cases, it isn't), then it can cause you more harm than good.